Canadian dollar edges weaker as commodity currencies dip

By Andrea Hopkins

2 Min Read

A man holds the new Canadian 100 dollar bill made of polymer in Toronto November 14, 2011.Mark Blinch

TORONTO (Reuters) - The Canadian dollar weakened slightly against its U.S. counterpart in early trade on Monday as commodity-linked currencies dipped after the Reserve Bank of Australia said mining investment had likely peaked.

While the euro strengthened against the greenback and global shares approached a three-month high on signs of compromise in U.S. talks to stop automatic tax hikes and spending cuts hurting the economy next year, the Canadian dollar dipped.

"CAD has weakened off a little since yesterday's close, it's been a bit of a volatile morning," said Camilla Sutton, chief currency strategist at Scotiabank.

"Interesting because the euro touched a new high overnight but CAD is failing to make new gains."

At 9:14 a.m. (1414 GMT), the Canadian dollar stood at C$0.9846 versus the U.S. dollar, or $1.0156, slightly below Monday's North American close at C$0.9837 versus the U.S. dollar, or $1.0166.

"All the other commodity currencies are also slightly weaker partially on the RBA's minutes, which highlighted that the investment boom in the mining industry is likely peaking, as well as a focus on employment, so that seems to be pulling down commodity currencies a little bit," Sutton said.

Australia's central bank said it decided to cut interest rates this month rather than wait because it saw further evidence that the peak in the mining investment boom was near, while the non-resource sector showed no signs of picking up.

The Reserve Bank of Australia expects the mining investment boom to peak sometime next year, according to minutes of the bank's December 4 meeting, released on Tuesday.

Canadian government bond prices were mixed, slipping across the long end. The two-year bond was down 0.5 Canadian cents to yield 1.155 percent, while the benchmark 10-year bond shed 16 Canadian cents to yield 1.841 percent.